attorneys for plaintiff federal trade commission 835 f.2d 554 (5th cir. 1987) ..... 38 ftc v....

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

DANIEL G. BOGDEN United States Attorney District of Nevada BLAINE T. WELSH Assistant United States Attorney Nevada Bar. No. 4790 333 Las Vegas Blvd. South, Suite 5000 Las Vegas, Nevada 89101 Phone: (702) 388-6336 Facsimile: (702) 388-6787 Email: [email protected] WILLARD K. TOM

General Counsel NIKHIL SINGHVI* JULIE G. BUSH* JASON D. SCHALL* Federal Trade Commission 600 Pennsylvania Avenue, NW Mailstop NJ-3158 Washington, D.C. 20580 Phone: (202) 326-3480 (Singhvi) Facsimile: (202) 326-3629 Email: [email protected]; [email protected]; [email protected]

(*Motion to permit appearance pending) Attorneys for Plaintiff Federal Trade Commission

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

FEDERAL TRADE COMMISSION,

Plaintiff, v.

AMG Services, Inc., et al., Defendants, and Park 269 LLC, et al.,

Relief Defendants.

Case No. 2:12-cv-536 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY INJUNCTION AND OTHER EQUITABLE RELIEF

Case 2:12-cv-00536 Document 5 Filed 04/02/12 of 49

ii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

TABLE OF CONTENTS

I. INTRODUCTION .................................................................................................. 1

II. JURISDICTION AND VENUE ............................................................................. 2

III. THE PARTIES........................................................................................................ 2

A. Federal Trade Commission ......................................................................... 2

B. Defendants .................................................................................................. 3

1. Lending Defendants in the Common Enterprise ............................. 3

2. Collaborating Defendants in the Common Enterprise ........................................................................................ 6

3. Individual Defendants in the Common Enterprise .......................... 8

4. Relief Defendants .......................................................................... 12

IV. DEFENDANTS’ UNLAWFUL BUSINESS PRACTICES ................................. 13

A. Defendants Misrepresent the Terms of the Loans .................................... 14

B. Defendants Require Preauthorized Electronic Fund Transfers ................................................................................................... 18

C. Defendants Issue False Threats to Coerce Consumers into Repaying their Alleged Debts ................................................................... 18

V. ARGUMENT ........................................................................................................ 19

A. The FTC Act Authorizes this Court to Grant the Requested Relief ......................................................................................................... 19

B. The Evidence Demonstrates a Likelihood of Success in Proving Violations of the FTC Act, TILA, and EFTA ............................. 21

1. FTC Act Violations ....................................................................... 21

2. TILA Violations ............................................................................ 26

3. EFTA Violations ........................................................................... 28


iii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

C. The Balance of Equities Favors Granting Injunctive Relief ..................... 29

D. Defendants Are Liable for Monetary and Injunctive Relief ..................... 30

1. Corporate Defendants ................................................................... 30

2. Individual Defendants ................................................................... 31

3. Relief Defendants .......................................................................... 34

4. Defendants Cannot Avoid Application of Federal Law Based on Tribal Affiliation ................................................... 35

E. A Preliminary Injunction Is Necessary to Preserve Effective Final Relief ................................................................................ 37

VI. CONCLUSION ..................................................................................................... 39


iv

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

TABLE OF AUTHORITIES

Cases

Am. Home Products, 98 F.T.C. 136 (1981) ...................................................................... 22

Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113 (9th Cir. 1985) ......................... 36

Fed. Express Corp. v. Fed. Expresso, Inc., No. 97-CV-1219, 1997 U.S. Dist. LEXIS 19144 (N.D.N.Y. Nov. 24, 1997) ..................................................................... 38

Fed. Power Comm’n. v. Tuscarora Indian Nation, 362 U.S. 99 (1960)........................... 36

FSLIC v. Dixon, 835 F.2d 554 (5th Cir. 1987) ................................................................. 38

FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999) ..................... 20, 21, 29, 32

FTC v. Brown & Williamson Tobacco Corp., 778 F.2d 35 (D.C. Cir. 1985) ............. 22, 24

FTC v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007) .............................................. 24

FTC v. City West Advantage, Inc., No. 08-609, 2008 WL 2844696 (D. Nev. July 22, 2008) ....................................................................................................................... 29

FTC v. Cyberspace.com, LLC, 453 F.3d 1196 (9th Cir. 2006) ....................... 21, 22, 23, 24

FTC v. Direct Mkt’g. Concepts, Inc., 624 F.3d 1 (1st Cir. 2010) ..................................... 21

FTC v. Evans Prods. Co., 775 F.2d 1084 (9th Cir. 1985) ................................................ 20

FTC v. Figgie Int’l, Inc., 994 F.2d 595 (9th Cir. 1993) .............................................. 21, 23

FTC v. Forensic Case Mgmt. Servs., Inc., Case No. LACV11-7484-RGK (C.D. Cal. Sep. 27, 2011) ............................................................................................ 20, 25, 26

FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192 (10th Cir. 2005) .................................. 37

FTC v. Grant Connect, LLC, 2:09-cv-01349-PMP-RJJ (D. Nev. Aug. 18, 2009) ..... 20, 31

FTC v. H.N. Singer, Inc., 668 F.2d 1107 (9th Cir. 1982) ....................................... 3, 19, 20

FTC v. Immigration Ctr., 3:11-cv-00055-LRH-VPC (D. Nev. Jan. 26, 2011) ................ 20

FTC v. Inc21.Com Corp., CV-10-0022-WHA (N.D. Cal. Feb. 19, 2010) ....................... 20

FTC v. Ivy Capital, Inc. No. 2:11-CV-283 JCM GWF, 2011 WL 2118626 (D. Nev. May 25, 2011) ...................................................................................................... 35


v

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

FTC v. J.K. Publ’ns, Inc., 99 F. Supp. 2d 1176 (C.D. Cal. 2000) .................................... 30

FTC v. John Beck Amazing Profits, LLC, 2009 U.S. Dist. LEXIS 130923 (C.D. Cal. Nov. 17, 2009) ....................................................................................................... 30

FTC v. MacGregor, No. 08–55838, 2009 WL 5184070 (9th Cir. Dec. 30, 2009) ........... 34

FTC v. Moneymaker, 2:11-cv-00461-R-LH-RJJ (D. Nev. Mar. 25, 2011) ...................... 20

FTC v. Nat’l Awards Serv. Advisory, cv-10-5418 (N.D. Cal. Dec. 15, 2010) .................. 20

FTC v. Nat'l Urological Group, Inc., 645 F.Supp.2d 1167 (N.D. Ga. 2008) ................... 32

FTC v. NCH, Inc., No. Civ. A. No. CV–94–138–LDG, 1995 WL 623190 (D. Nev. Sept. 5, 1995) ................................................................................................................ 34

FTC v. Network Servs. Depot, Inc., 617 F.3d 1127 (9th Cir. 2010) ................................. 30

FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994) ..................................................... 21

FTC v. Publ’g Clearing House, Inc., 104 F.3d 1168 (9th Cir. 1997) ............................... 32

FTC v. Rawlins & Rivera, No. 07-CV-146 (M.D. Fla. 2007) .................................... 25, 26

FTC v. Rincon Mgmt. Servs., LLC, 5:11-cv-01623-VAP-SP (C.D. Cal. Nov. 10, 2011) ................................................................................................................. 20, 25, 26

FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312 (8th Cir. 1991) ......................... 38

FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) .............................................................. 21

FTC v. Think Achievement Corp., 144 F. Supp. 2d 993 (N.D. Ind. 2000) ................. 30, 34

FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431 (11th Cir. 1984)........................................ 19

FTC v. Vocational Guides, Inc., No. 01-0170, 2008 WL 4908769 (M.D. Tenn. Nov. 12, 2008) .............................................................................................................. 38

FTC v. World Wide Factors, Ltd., 882 F.2d 344 (9th Cir. 1989) ......................... 20, 21, 29

Goldyn v. Hayes, 444 F.3d 1062 (9th Cir. 2006) .............................................................. 24

NLRB v. Chapa De Indian Health Program, Inc., 316 F.3d 995 (9th Cir. 2003) ............. 36

Porter v. Warner Holding Co., 328 U.S. 395 (1946)........................................................ 38

Removatron Int’l Corp. v. FTC, 884 F.2d 1489 (1st Cir. 1989) ....................................... 22


vi

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

SEC v. Bankers Alliance Corp., 881 F. Supp. 673 (D.D.C. 1995) ................................... 38

SEC v. Parkersburg Wireless LLC, 156 F.R.D. 529 (D.D.C. 1994) ................................. 38

SEC v. Unifund SAL, 910 F.2d 1028 (2d Cir. 1990) ......................................................... 39

United States v. Diapulse Corp. of Am., 457 F.2d 25 (2d Cir. 1972) ............................... 30

United States v. Laerdal Mfg., 73 F.3d 852 (9th Cir. 1995) ............................................. 20

United States v. Odessa Union Warehouse Co-op, 833 F.2d 172 (9th Cir. 1987) ........... 21

United States v. W.T. Grant Co., 345 U.S. 629 (1953) ..................................................... 20

United States v. Yakima Tribal Court, 806 F.2d 853 (9th Cir. 1986) ............................... 36

United States. v. Red Lake Band Of Chippewa Indians, 827 F.2d 380 (8th Cir. 1987) ............................................................................................................................. 35

Statutes

15 U.S.C. § 1606(c) .......................................................................................................... 28

15 U.S.C. § 1607(c) ...................................................................................................... 3, 27

15 U.S.C. § 1631(a) .......................................................................................................... 26

15 U.S.C. § 1638(b)(1) ..................................................................................................... 26

15 U.S.C. § 1692 ............................................................................................................... 25

15 U.S.C. § 1692e(4) ........................................................................................................ 25

15 U.S.C. § 1692e(5) ........................................................................................................ 26

15 U.S.C. § 1693k(1) ........................................................................................................ 28

15 U.S.C. § 1693o(c) .................................................................................................... 3, 28

15 U.S.C. § 41 ..................................................................................................................... 2

15 U.S.C. § 45(a) .......................................................................................................... 2, 21

15 U.S.C. § 53(b) ...................................................................................................... 2, 3, 20

15 U.S.C. § 56(a)(2)(A) ...................................................................................................... 3


vii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

15 U.S.C. § 57b ................................................................................................................... 3

15 U.S.C. §§ 1601-1666j .................................................................................................... 2

15 U.S.C. §§ 1693-1693r .................................................................................................... 2

28 U.S.C. § 1331 ................................................................................................................. 2

28 U.S.C. § 1337(a) ............................................................................................................ 2

28 U.S.C. § 1345 ................................................................................................................. 2

28 U.S.C. § 1391 ................................................................................................................. 2

K.S.A. § 17-7681(f) ............................................................................................................ 3

Treatises

15 Fletcher Cyclopedia of the Law of Corporations § 7121 ............................................... 3

16A C.J.S. Const. § 710 .................................................................................................... 25

5 Am. Jur. 2d Arrest § 54 .................................................................................................. 25

53 C.J.S. Licenses § 115 ................................................................................................... 26

9 Richard A. Lord, A Treatise on the Law of Contracts § 20:38 ...................................... 26

Regulations

12 C.F.R § 205.10(e)......................................................................................................... 28

12 C.F.R § 205.2(f) ........................................................................................................... 29

12 C.F.R § 205.2(j) ........................................................................................................... 28

12 C.F.R § 205.2(k) .......................................................................................................... 29

12 C.F.R. § 1026.17(a)...................................................................................................... 26

12 C.F.R. § 1026.17(b) ..................................................................................................... 26

12 C.F.R. § 1026.17(c)...................................................................................................... 28

12 C.F.R. § 1026.18 .......................................................................................................... 26

12 C.F.R. § 1026.2(a)(10) ................................................................................................. 27


viii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

12 C.F.R. § 1026.2(a)(17) ................................................................................................. 27

12 C.F.R. § 1026.2(a)(20) ................................................................................................. 27

12 C.F.R. § 1026.22(a)(2) ................................................................................................. 28

FRB Staff Commentary to Regulation E, § 205.10(e)(1)-1, Supp. 1 ................................ 28


1

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

I. INTRODUCTION

Plaintiff Federal Trade Commission (“Commission” or “FTC”) brings this action

to halt a web of Internet-based payday lenders1 that deceive consumers about the costs of

their loans and engage in unlawful debt collection practices. Plaintiff respectfully seeks

an order of this Court preliminarily enjoining Defendants’ ongoing violations of the

Federal Trade Commission Act (“FTC Act”), the Truth in Lending Act (“TILA”), and the

Electronic Fund Transfer Act (“EFTA”).

Defendants constitute a common enterprise of payday lenders and associated

persons who provide consumers false information about the cost of the loans they issue,

in violation of the FTC Act and TILA. On their websites and in their loan documents,

Defendants represent to the consumer that the total amount required to repay his loans

will be the amount borrowed plus a specified, one-time finance charge, to be withdrawn

automatically via electronic fund transfer on a single date. But contrary to those

representations, Defendants initiate multiple withdrawals from the consumer’s bank

account, assessing a new finance charge each time. As a result of this practice, the loan

costs the consumer significantly more than the sum Defendants initially represent. In a

typical example discussed below, Defendants represented to a consumer that a $300 loan

would be repaid with a single $390 withdrawal, but instead initiated a series of automatic

withdrawals that would have resulted in $975 in repayments had the consumer not closed

her account after Defendants made seven withdrawals totaling $735.

Further, in violation of EFTA, Defendants include in their loan contracts a

provision requiring consumers to preauthorize electronic transfers from their bank

1 A “payday loan” is a short-term, high-interest, unsecured loan. These loans are called “payday loans”

because they are often due on the consumer’s first payday after receiving the loan.


2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

accounts in order to obtain payday loans. This provision allows Defendants to prey on

vulnerable consumers by making automatic withdrawals from their bank accounts.

When consumers learn of Defendants’ ruse and attempt to stop Defendants’

automatic withdrawals from their bank accounts, Defendants begin a barrage of deceptive

collection tactics prohibited by the FTC Act. Specifically, Defendants threaten

consumers with criminal prosecution, when in fact Defendants cannot expose consumers

to criminal sanctions for failure to pay alleged private debts. Defendants also represent

that they will sue consumers, when in fact they have no intent to do so.

II. JURISDICTION AND VENUE

This Court has subject matter jurisdiction pursuant to 15 U.S.C. §§ 45(a) and

53(b) and 28 U.S.C. §§ 1331, 1337(a), and 1345. Venue in this district is proper pursuant

to 15 U.S.C. § 53(b) and 28 U.S.C. §§ 1391(b)-(c). Each defendant resides in or has

transacted business in the District of Nevada.

III. THE PARTIES

A. Federal Trade Commission

The FTC is an independent agency of the United States Government created by

statute. 15 U.S.C. § 41, et seq. The FTC enforces Section 5(a) of the FTC Act, 15

U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting

commerce. The FTC also enforces TILA, 15 U.S.C. §§ 1601-1666j, which establishes,

inter alia, disclosure and calculation requirements for consumer credit transactions and

advertisements, and EFTA, 15 U.S.C. §§ 1693-1693r, which regulates the rights,

liabilities, and responsibilities of participants in electronic fund transfer systems.

The FTC is authorized to initiate federal district court proceedings, by its own

attorneys, to enjoin violations of the FTC Act, TILA, and EFTA, and to secure such

equitable relief as may be appropriate in each case, including rescission or reformation of

contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten


3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

monies. 15 U.S.C. §§ 53(b), 56(a)(2)(A), 56(a)(2)(B), 57b, 1607(c), 1693o(c); see also

FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1110-13 (9th Cir. 1982).

B. Defendants

Defendants constitute a common enterprise of entities that operate and facilitate

the lending and collections operations, as well as individuals who have authority to

control and directly participate in the unlawful activities. In addition, two relief

defendants unjustly reap significant financial benefits from Defendants’ unlawful

practices.

1. Lending Defendants in the Common Enterprise

Defendants AMG Services, Inc., Red Cedar Services, Inc., SFS, Inc., and Tribal

Financial Services Corporation (collectively, “Lending Defendants”) offer and extend

consumer payday loans through at least substantially similar five websites ultimately

operated and controlled by AMG Services, Inc. The Lending Defendants are primarily

controlled by two brothers, Defendant Scott Tucker and Defendant Blaine Tucker.

Defendant AMG Services, Inc. (“AMG”) is a corporation chartered under the

laws of the Miami Tribe of Oklahoma2 with its principal place of business at 10895

Lowell Avenue, Overland Park, Kansas.3 AMG’s predecessor, CLK Management, LLC

(“CLK”),4 was the original owner of the trademarks for OneClickCash,

UnitedCashLoans, USFastCash, and Ameriloan, and offered and extended payday loans

2 PX22 at 909. There are 22 declarations submitted as exhibits in support of this motion, numbered

PX01 to PX22. Attachments to the declarations are consecutively numbered.

3 PX22 at 1094-97. The city for 10895 Lowell Avenue is sometimes listed as “Shawnee Mission” or “Overland Park” throughout the documents reviewed by the FTC, but in either case the zip code and state for the 10895 Lowell Avenue address is the same.

4 AMG is the surviving entity of a June 2008 merger with CLK, which was formerly known as BAT Services, Inc. PX22 at 893-95, 906, 909. As a result of AMG’s merger with CLK, AMG is responsible for the pre-merger liabilities of CLK. See K.S.A. § 17-7681(f); see also 15 Fletcher Cyclopedia of the Law of Corporations § 7121.


4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

under those trade names.5 CLK transferred the trademark OneClickCash to Defendant

SFS, Inc., and the trademarks UnitedCashLoans, USFastCash, and Ameriloan to

Defendant Tribal Financial Services Corporation, on September 25, 2006.6

Notwithstanding the transfer of those trademarks, AMG operates the Lending

Defendants’ payday lending and collections enterprise with a centralized workforce on its

payroll.7 AMG maintains the telephone numbers associated with all of the other Lending

Defendants.8 At the direction of Scott Tucker and Blaine Tucker, AMG, Black Creek

Capital, Level 5 Motorsports, LLC, and other associated entities under the Tuckers’

control collect nearly all of the revenue generated from the Lending Defendants.9 AMG

is purportedly wholly owned by the Miami Tribe of Oklahoma.10

Defendant Red Cedar Services, Inc. (“Red Cedar Services”), also doing business

as 500FastCash, is a corporation chartered under the laws of the Modoc Tribe of

Oklahoma and is registered to do business at 515 G Street Southeast, Miami,

Oklahoma.11 Red Cedar Services nominally offers and extends payday loans via

www.500fastcash.com.12 MTE Financial Enterprises (“MTE”) also claims to do business

5 PX22 at 627-28 ¶¶ 93-95; 1963, 2036, 2136, 2153.

6 PX22 at 627-28 ¶ 95; see also PX22 at 1982, 2065, 2149, 2180.

7 PX22 at 922-23 ¶¶ 3, 4, 7; PX22 at 601-02 ¶¶ 48-51.

8 PX22 at 605-06 ¶¶ 59-60.

9 PX22 at 606-10 ¶¶ 61-68; 616-20 ¶¶ 81-85.

10 PX22 at 897 ¶ 3. Certain Defendants have argued in various state proceedings that their affiliations with Indian tribes immunize them from state law enforcement actions. As discussed in Part V.D.4 infra, however, no such argument as to any Defendant applies in this federal proceeding. In any event, as described in this memorandum and the accompanying volume of exhibits, the overwhelming majority of Defendants’ operations do not take place on tribal land, and the overwhelming majority of the profits derived from the enterprise does not go to tribes or tribal members.

11 PX22 at 911-920.

12 PX22 at 1109.


5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

as 500FastCash.13 Red Cedar Services and MTE share an address and both are

purportedly owned by the Modoc Tribe of Oklahoma.14

Defendant SFS, Inc., also doing business as OneClickCash, is a corporation

chartered under the laws of the Santee Sioux Nation with an address at 52946 Highway

12, Suite 3, Niobrara, Nebraska.15 It nominally offers and extends payday loans via

www.oneclickcash.com.16 SFS, Inc. claims to be wholly owned by the Santee Sioux

Nation.17

Defendant Tribal Financial Services Corporation (“TFS Corp.”), also known as

Miami Nation Enterprises (“MNE”) and also doing business as UnitedCashLoans,

USFastCash, and Ameriloan, is a corporation chartered under the laws of the Miami

Tribe of Oklahoma.18 TFS Corp. has an address at 3531 P Street, NW, Miami,

Oklahoma.19 It offers and extends payday loans via www.unitedcashloans.com,

www.usfastcash.com, and www.ameriloan.com.20 TFS Corp. claims to be wholly owned

by the Miami Tribe of Oklahoma.21

13 PX22 at 1688.

14 PX22 at 1688; PX22 at 1109; PX22 at 1050 ¶ 2.

15 PX22 at 1012 ¶ 3; PX22 at 1217; PX22 at 1693.

16 PX22 at 1217.

17 PX22 at 1012 ¶ 4; PX22 at 1217.

18 PX22 at 1984, 2151, 2182; PX22 at 939 ¶¶ 7-8.

19 PX22 at 1982, 2149, 2180.

20 PX22 at 1186, 1285, 1318.

21 PX22 at 1186, 1285, 1318.


6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2. Collaborating Defendants in the Common Enterprise

Defendants Level 5 Motorsports, LLC, LeadFlash Consulting, LLC,

PartnerWeekly, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners,

LLC, Partner Weekly, LLC, AMG Capital Management, LLC, and The Muir Law Firm,

LLC (collectively, “Supporting Defendants”) participate in the Lending Defendants’

payday loan operations by providing management and consulting services, paying the

Lending Defendants’ expenses, and distributing the earnings from the Lending

Defendants to various individuals and entities associated with the Lending Defendants

and the Supporting Defendants.

Defendant Level 5 Motorsports, LLC (“Level 5”) is a Nevada limited liability

company with management and a registered agent at 871 Coronado Center Drive, Suite

200, Henderson, Nevada.22 Scott Tucker is the owner of Level 5,23 and, along with

Blaine Tucker, one of the only two people authorized to write checks on its behalf.24

Scott Tucker was the Manager of Level 5 upon its founding.25 The Lending Defendants

regularly transfer millions of dollars to Level 5 (tens of millions of dollars in the

aggregate), ostensibly for “sponsorship” fees that benefit Scott Tucker’s automobile

various racing endeavors.26

Defendant LeadFlash Consulting, LLC (“LeadFlash”) is a Nevada limited

liability company with management and a registered agent at 871 Coronado Center

Drive, Suite 200, Henderson, Nevada.27 From June 2010 to May 2011, the Lending

22 PX22 at 687.

23 PX22 at 1409.

24 PX22 at 1612-13.

25 PX22 at 680.

26 PX22 at 619-20 ¶¶ 84-85.

27 PX22 at 676.


7

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Defendants transferred more than $3,000,000 to LeadFlash, ostensibly for “consulting”

fees.28 Blaine Tucker is the only signatory on LeadFlash’s bank account.29

Defendant Broadmoor Capital Partners, LLC is a Nevada limited liability

company with management and a registered agent at 871 Coronado Center Drive,

Henderson, Nevada.30 Its checks are labeled with the same address,31 and it has a place

of business at 10895 Lowell Avenue, Overland Park, Kansas.32 Broadmoor Capital

Partners, LLC covers payroll expenses for AMG.33

Defendant Black Creek Capital Corporation (“Black Creek Capital”), is a

Nevada corporation with management and a registered agent at 289 Manzanita Ranch

Lane, Henderson, Nevada.34 Lending Defendants TFS Corp., SFS, Inc., and Red Cedar

Services routinely make substantial payments to Black Creek Capital.35 Black Creek

Capital, in turn, has made regular payroll payments on behalf of AMG (and CLK as

AMG’s predecessor) since 2008 and routinely transfers extraordinary sums of money (at

least $40 million in the aggregate) to and from the Corporate Defendants, Individual

Defendants, Relief Defendants, and other associated persons.36

28 PX22 at 618-19 ¶ 83.

29 PX22 at 1609-1610.

30 PX22 at 673.

31 PX22 at 1700.

32 PX22 at 1436.

33 PX22 at 590 ¶ 9; 1700.

34 PX22 at 651.

35 PX22 at 616-17 ¶ 81.

36 PX22 at 616-17 ¶ 81; 589-90 ¶ 8; 1696.


8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Defendant PartnerWeekly, LLC is a Nevada limited liability company with

management at 325 East Warm Springs Road, Suite 200, Las Vegas, Nevada.37 Black

Creek Capital owns fifty percent of PartnerWeekly, LLC.38 Partner Weekly, LLC

receives payday loan revenue directly from the Lending Defendants’ payday lending

accounts and from Black Creek Capital.39

Defendant AMG Capital Management, LLC is a Nevada limited liability

company with management and a registered agent at 871 Coronado Center Drive, Suite

200, Henderson, Nevada and an address at 10895 Lowell Avenue, Overland Park,

Kansas.40 AMG Capital Management, LLC uses its bank accounts to transfer money

between Defendants.41

Defendant The Muir Law Firm, LLC (“The Muir Firm”) is a Kansas limited

liability company with its place of business at 10895 Lowell Avenue, Overland Park,

Kansas.42 The Muir Firm pays the website registration costs and other fees for each of

the Lending Defendants.43

3. Individual Defendants in the Common Enterprise

Defendants Scott A. Tucker, Blaine A. Tucker, Timothy J. Muir, Don E. Brady,

Robert D. Campbell, and Troy L. LittleAxe (“Individual Defendants”) participate directly

37 PX22 at 702.

38 PX22 at 691.

39 PX22 at 590-91 ¶ 11; 616-17 ¶ 81; 1565.

40 PX22 at 592 ¶ 15; 797, 881.

41 PX22 at 616-17 ¶ 81.

42 PX22 at 883.

43 PX22 at 604-05 ¶ 58.


9

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

in and have knowledge of the unlawful activity discussed herein, and have authority to

control the companies involved in those practices.

Defendants Scott Tucker and Blaine Tucker are the individuals who primarily

control each of the Lending Defendants. From AMG’s Overland Park, Kansas office

(shared with several other defendants), the Tuckers are actively involved in monitoring

the lending and collections activities of the payday operations discussed herein.44

Moreover, they are designated signatories on the bank accounts of each of the Corporate

Defendants45 (except The Muir Law Firm) and are the only individuals observed signing

approximately 10,000 checks for at least 46 of the Corporate Defendants’ 57 known bank

accounts.46

Scott Tucker47 was the sole member and President of CLK, which later merged

into AMG.48 He is the Secretary of Broadmoor Capital Partners, LLC.49 He is the owner

of Level 5, as well as its Secretary, and was its Manager upon its formation.50 Scott

Tucker directed CLK’s application for, and assignment of, the trademarks

“OneClickCash,” “UnitedCashLoans,” “USFastCash,” and “Ameriloan.”51 AMG, Black

Creek Capital, Level 5, and other entities under Scott Tucker’s control pay many of Scott

44 PX22 at 922-24 ¶¶ 3, 4, 8-10.

45 PX22 at 607-08 ¶¶ 63-64.

46 PX22 at 608 ¶ 64.

47 PX22 at 598-99 ¶¶ 34-35; 1080 (graphic showing various Scott Tucker affiliations).

48 PX22 at 897 ¶ 1; 909, 1955-56, 1984.

49 PX22 at 1586.

50 PX22 at 680, 682, 1409, 1612.

51 In fact, Scott Tucker personally signed the relevant trademark documents. PX22 at 627-28 ¶ 95; see also PX22 at 1953, 1956, 1959, 1965, 1968, 1970, 1973, 1975-76, 1984, 2056, 2059, 2062, 2067, 2140, 2143, 2146, 2151, 2156, 2159, 2162, 2182.


10

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Tucker’s personal expenses, such as: luxury automobiles; private jets; and the mortgage

for and maintenance of a luxury home in Aspen, Colorado.52 In addition to the payment

of personal expenses and the millions of dollars transferred to the entities that directly

benefit him, Scott Tucker has received at least $806,000 in payroll from CLK and AMG

from 2007 through the third quarter of 2011.53 Scott Tucker further directed a Black

Creek Capital bank account to transfer $4,133,599.00 to himself and his wife, Relief

Defendant Kim Tucker.54

Blaine Tucker55 is an officer of AMG and TFS Corp and a member of LeadFlash

Consulting.56 Blaine Tucker was also the manager of AMG Capital Management, LLC

upon its formation.57 Along with Scott Tucker, Blaine Tucker orchestrates the movement

of funds from the Lending Defendants to the other Defendants and associated entities.58

In addition to the payment of personal expenses and the millions of dollars transferred to

his company LeadFlash, Blaine Tucker has received at least $1,295,600.79 in payroll

from CLK and AMG from 2007 through the third quarter of 2011.59

Defendant Timothy Muir60 is the sole member of The Muir Law Firm, LLC,61

and was the “resident agent” of Level 5 upon its formation.62 He is also the President,

52 PX22 at 610-16 ¶¶ 68-80.

53 PX22 at 1107.

54 PX22 at 617 ¶ 81.

55 PX22 at 599 ¶¶ 36-37; 1082 (graphic showing various Blaine Tucker affiliations).

56 PX22 at 1569, 1609-10, 1664-65.

57 PX22 at 789-82.

58 PX22 at 607-08 ¶¶ 63-64.

59 PX22 at 618 ¶ 83; 1107.

60 PX22 at 599-600 ¶¶ 38-39; 1084 (graphic showing various Timothy Muir affiliations).


11

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Secretary, Treasurer, and Director of Black Creek Capital.63 He has received hundreds of

thousands of dollars in compensation and payments from the common enterprise, in

addition to at least $220,203.48 paid to his firm, of which he is the only member or

employee.64

Defendant Don Brady65 is the chief executive officer of AMG, chief executive

officer of MNE, and administrator for www.unitedcashloans.com, www.usfastcash.com,

and www.ameriloan.com.66 He is a signatory on the TFS Corp. bank accounts.67 Brady

has stated that he manages the “day-to-day operation[s]” of MNE, is “ultimately

responsible for [its] marketing [and] strategy,” and supervises its lending operations.68

Brady has also stated that UnitedCashLoans, USFastCash, and Ameriloan are “strictly

regulated by … all federal laws.”69 Brady directly participates in the defense of the

Lending Defendants in state law enforcement proceedings.70

Defendant Robert Campbell71 is an officer of SFS, Inc. and the administrator for

www.oneclickcash.com.72 He is a signatory on the SFS, Inc. bank account.73 Campbell

61 PX22 at 596 ¶ 29; 886-88.

62 PX22 at 679-82.

63 PX22 at 648-51.

64 PX22 at 610 ¶ 68; 617-19 ¶¶ 81-84; 886, 1107.

65 PX22 at 600 ¶¶ 40-41; 1086 (graphic showing various Don Brady affiliations).

66 PX22 at 604-05 ¶ 58; 927-29 ¶ 2; 936-33 ¶ 3; 937-42 ¶ 2; 1097.

67 PX22 at 1664-65.

68 PX22 at 927-29 ¶ 2; 931-33 ¶ 6; 937-42 ¶¶ 2, 7.

69 PX22 at 937-42 ¶ 9.

70 See generally PX22 at 927-1005.

71 PX22 at 600 ¶¶ 42-43; 1088 (graphic showing various Robert Campbell affiliations).


12

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

has stated that he is knowledgeable regarding the “day-to-day operations” of SFS, Inc., its

lending, and its marketing and strategy.74 Campbell directly participates in the defense of

the Lending Defendants in state law enforcement proceedings.75

Defendant Troy LittleAxe76 is the secretary and registered agent of Red Cedar

Services and the administrator for www.500fastcash.com.77 He is a signatory on the Red

Cedar Services bank account.78 LittleAxe is also chief executive officer of MTE, and has

stated that he manages its day-to-day operations.79 He participates in the defense of the

Lending Defendants in state law enforcement proceedings and is in regular contact with

co-defendants Scott Tucker and Timothy Muir regarding confidential legal advice, trade

secrets, and financial information pertaining to the common enterprise.80

4. Relief Defendants

Relief Defendant Park 269 LLC (“Park 269”) is a Kansas limited liability

company with a registered office at 5600 West 97th Street, Overland Park, Kansas81 that

was organized by Relief Defendant Kim Tucker on April 30, 2009.82 Park 269 owns a

72 PX22 at 604-05 ¶ 58; 1656-57.

73 PX22 at 1656-57.

74 PX22 at 1007-09 ¶ 3; 1011-13 ¶ 5; 1015-19 ¶¶ 4, 8.

75 See generally PX22 at 1007-19.

76 PX22 at 601 ¶¶ 44-45; 1090 (graphic showing various Troy LittleAxe affiliations).

77 PX22 at 604-05 ¶ 58; 911, 913, 917, 1653-54.

78 PX22 at 1653-54.

79 PX22 at 1045-47 ¶¶ 2-3; 1055-56 ¶ 2; 1060-62 ¶¶ 2-3; 1064-66 ¶¶ 2-3.

80 PX22 at 1037-43; see also PX22 at 1045-62.

81 PX22 at 819-24.

82 PX22 at 819-20.


13

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

property located at 269 Park Avenue, Aspen, Colorado that it purchased on May 8, 2009

for $8,000,000.83 At Scott Tucker’s direction, AMG has spent at least $1,519,793.78 on

the purchase, renovation, and maintenance of the property at 269 Park Avenue, Aspen,

Colorado.84 AMG also directly paid the property taxes due on this property for 2009 and

2010.85 As discussed in Part V.D.3, infra, Park 269 has no legitimate claim to these

assets and expenditures, which are traceable to funds obtained from consumers through

Defendants’ unlawful practices.

Relief Defendant Kim C. Tucker86 is the wife of Scott Tucker. Between January

2008 and March 2011, she received at least $844,263.00 in payments from Black Creek

Capital and, as discussed above, the $4,133,599.00 single payment made jointly to her

and Scott Tucker.87 As discussed in Part V.D.3, infra, she has no legitimate claim to

these assets, which are traceable to funds obtained from consumers through Defendants’

unlawful practices.

IV. DEFENDANTS’ UNLAWFUL BUSINESS PRACTICES

Defendants offer and extend payday loans to consumers throughout the U.S.,

including in states in which Defendants’ fees are unlawfully high or in which Defendants

are not licensed to lend.88 Defendants offer their loans through a variety of websites,

83 PX22 at 829-30.

84 PX22 at 612-16 ¶¶ 73-80.

85 PX22 at 832-34.

86 PX22 at 601 ¶¶ 46-47; 1092 (graphic showing various Kim Tucker affiliations).

87 PX22 at 616-17 ¶ 81.

88 Several states have brought proceedings against one or more Defendants, alleging that their loans violate state licensing and/or usury laws. See, e.g. http://www.ndbf.ne.gov/searches/Orders/20070824_SFS_Inc_dba_One_Click_Cash.pdf (Neb.); http://www.corp.ca.gov/ENF/list/a/ameriloan.asp (Cal.); http://www.nh.gov/banking/orders/enforcement/documents/order10-081Sfs-cd-otsc.pdf (N.H.); http://www.wvago.gov/press.cfm?fx=more&ID=447 (W. Va.)


14

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

including www.500fastcash.com, www.ameriloan.com, www.oneclickcash.com,

www.unitedcashloans.com, and www.usfastcash.com, to consumers who “[n]eed cash

quick but [are] caught between paydays.”89 Defendants’ websites, and the loan contracts

they generate, are nearly identical.90

Defendants’ lending practices violate federal law in two respects. First,

Defendants misstate the terms of the loans, including by charging consumers well in

excess of the costs they initially represent, in violation of the FTC Act and TILA.

Second, Defendants condition the extension of credit on consumers’ preauthorizing

repayment by electronic fund transfer, in violation of EFTA.

Finally, Defendants’ collections violate federal law because Defendants threaten

criminal sanctions and civil litigation against nonpaying consumers, even though

Defendants have no intention (and in many cases no ability) to initiate such actions.

A. Defendants Misrepresent the Terms of the Loans

Defendants’ various websites use nearly identical language to advertise and

describe their loans to consumers. Significantly, they all state, “When your loan is due,

we automatically deduct your scheduled payment from your bank account along with any

applicable fees.”91 After the consumer completes a loan application on the website,

Defendants provide a Loan Note and Disclosure document (“Loan Disclosure”),

containing a prominent box that, among other things, represents that the “Total of

Payments” will equal the amount financed plus a stated finance charge.92 The box also

equates the “Total of Payments” with the “scheduled payment” by stating that the “Total

89 PX22 at 1113, 1190, 1222, 1289, 1322.

90 PX02 at 14-15 ¶¶ 5-6, 8-9; PX22 at 602-03 ¶¶ 52-53.

91 PX22 at 1113, 1190, 1222, 1289, 1322.

92 PX10 at 343.


15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

of Payments” is “[t]he amount you will have paid after you have made the scheduled

payment.”93

One representative consumer took out a $300 loan from Defendants with a stated

finance charge of $90. Defendants then delivered to the consumer a Loan Disclosure

prominently stating that the consumer would repay a total of $390 to satisfy the loan:94

ANNUAL PERCENTAGE RATE

The cost of your credit as

a yearly rate

684.38%

FINANCE CHARGE

The dollar amount the credit will cost you.

$90.00

Amount Financed

The amount of credit provided to you or on

your behalf.

$300.00

Total of Payments

The amount you will have paid after you have

made the scheduled payment.

$390.00

Following that box, Defendants present confusing, buried terms that contradict the

earlier, straightforward representations regarding the loan’s cost and duration:95

Your Payment Schedule will be: 1 payment of $390.00 due on 2010-09-24, if you decline* [t]he option of renewing your loan. If your pay date falls on a weekend or holiday and you have direct deposit, your account will be debited on [t]he business day prior to your normal pay date. If renewal is accepted you will pay the finance charge of $90.00 only, on 2010-09-24[.] You will accrue new finance charges with every renewal of your loan. On the due date resulting from a four[t]h renewal and every renewal due date thereafter, your loan must be paid down by $50.00. This means your Account will be debited the finance charge plus $50.00 on the due date. This will continue until your loan is paid in full. *To decline the option of renewal, you must select your payment options using the Account Summary link sent to your email at least three business days before your loan is due.

In the typical case, rather than withdrawing the consumer’s “scheduled payment”

or “Total of Payments” on a single date as represented on Defendants’ websites and Loan

93 PX10 at 343.

94 PX10 at 343 (emphasis in original, footnote regarding APR calculation omitted).

95 PX10 at 343 (emphasis in original).


16

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Disclosure, Defendants withdraw only an amount equal to the finance charge from the

consumer’s bank account, leaving the entire principal balance outstanding. Defendants

repeat this process three more times, each time withdrawing only the finance charge

amount and applying none of the withdrawn funds to the consumer’s principal. Only on

the fifth payday and each subsequent payday do Defendants withdraw $50 sums from the

consumer’s bank account to repay principal, while continuing to assess additional finance

charges until the entire principal is repaid.

The result of Defendants’ multi-payment loan structure is that Defendants charge

the consumer numerous finance charges instead of one, and thus withdraw from the

consumer a total repayment amount well in excess of the “Total of Payments”

conspicuously stated in the Loan Disclosure. And because Defendants initiate

withdrawals from consumers automatically via electronic fund transfers, consumers are

frequently surprised to learn subsequently that many of their repayments were applied

only to repeated finance charges and did not at all reduce their outstanding principal.96

In the example of the aforementioned $300 loan, Defendants withdrew a $90

finance charge from the consumer’s account on the date her loan was “due” and a $90

finance charge on each of her next three paydays, for a total of $360 withdrawn and

applied solely to multiple finance charges. On the consumer’s fifth payday following the

loan, Defendants withdrew $140 (a fifth $90 finance charge plus $50 for the first

payment toward principal). Eventually, Defendants made withdrawals from the

consumer’s account on seven successive paydays, totaling $735, before she closed her

bank account to prevent further withdrawals.97

96 PX07 at 240 ¶¶ 3-4, 7-8; PX12 at 438-39 ¶¶ 7-13; PX11 at 416-18 ¶¶ 3, 6, 11, 16.

97 PX10 at 321-22 ¶¶ 10-13.


17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Defendants provide some information about the loan structure at the end of an

email sent after the consumer has already agreed to the loan.98 Importantly, however,

Defendants nowhere disclose the finance charge, APR, payment schedule, and total of

payments that a consumer must pay under the actual, multi-part loan Defendants have

configured. In the case of a $300 loan, the actual loan repayment schedule and

application of withdrawn funds to finance charges and principal would be as follows:

Payday Payment Finance Charge (30% of remaining principal balance)

Applied To Principal

Remaining Principal Balance

Total Paid To Date

1 $90 $90 $0 $300 $90

2 $90 $90 $0 $300 $180

3 $90 $90 $0 $300 $270

4 $90 $90 $0 $300 $360

5 $140 $90 $50 $250 $500

6 $125 $75 $50 $200 $625

7 $110 $60 $50 $150 $735

8 $95 $45 $50 $100 $830

9 $80 $30 $50 $50 $910

10 $65 $15 $50 $0 $975

TOTAL $975 $675 $300 $975

This $300 loan would be paid back over 10 payments, yield an accumulated

finance charge of $675, and result in a total of payments of $975, a marked difference

from the single repayment date, $90 finance charge, and $390 total of payments that

Defendants represented to the consumer. The APR for the loan, if paid back in

98 PX10 at 348-49.


18

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

accordance with the above payment schedule, would be 727.3669%,99 but Defendants

represented to the consumer that the loan’s APR would be 684.38%.100

B. Defendants Require Preauthorized Electronic Fund Transfers

As a condition of extending credit, Defendants require that borrowers authorize

them to withdraw loan payments by electronic fund transfer. The Loan Disclosure states,

“Any payment due on the Note shall be made by us effecting one or more ACH debit

entries to your Account at the Bank. You authorize us to effect this payment by these

ACH debit entries.”101 Defendants further require consumers to sign a document entitled

“Privacy Policy and Authorization Agreement” that authorizes the Defendant to “initiate

one or more ACH debit entries . . . to [the consumer’s] Deposit Account . . . for the

payments that come due each pay period . . . .”102

In addition to imposing these requirements at the outset of the loan, Defendants

have generally refused later attempts by consumers to repay their loans by other means

(including by wire transfer or cashier’s check) and insisted that consumers only pay via

electronic fund transfers or debit card payments.103

C. Defendants Issue False Threats to Coerce Consumers into Repaying their Alleged Debts

In their debt collection activities, Defendants frequently issue threats to

consumers that they cannot and do not carry out. Specifically, Defendants on numerous

occasions tell consumers that they will be arrested or imprisoned if they do not continue

99 PX22 at 2184.

100 PX10 at 343.

101 PX10 at 344. Automatic Clearinghouse, or ACH, debit entries are a form of electronic fund transfer.

102 PX10 at 345.

103 PX4 at 216 ¶ 22; PX5 at 227 ¶ 21; PX6 at 236-37 ¶¶ 13, 17-18.


19

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

making payments to the lenders.104 In fact, Defendants take no steps to initiate law

enforcement action against consumers, and in any event consumers cannot be arrested or

imprisoned for failing to pay the types of private debts claimed by Defendants.

Defendants also tell consumers in numerous instances that they will sue consumers if

they do not continue repaying their alleged debts.105 In fact, Defendants do not sue

consumers for debt collection.

V. ARGUMENT

The FTC requests that the Court enter the proposed preliminary injunction to

prevent further harm to consumers by halting Defendants’ deceptive and unlawful

practices. As set forth below: (A) this Court has authority to grant the requested relief;

(B) the FTC is likely to succeed on the merits of all its claims; (C) the equities favor entry

of an injunction; (D) Defendants are jointly and severally liable for injunctive and

monetary relief, and Relief Defendants are liable for monetary disgorgement; and (E) an

injunction is necessary to preserve effective final relief.

A. The FTC Act Authorizes this Court to Grant the Requested Relief

This Court has authority to grant preliminary and permanent relief pursuant to the

second proviso of Section 13(b) of the FTC Act,106 which provides that “in proper cases

104 PX6 at 236 ¶ 15; PX14 at 448 ¶ 19.

105 PX4 at 215-16 ¶ 19; PX6 at 236 ¶ 15; PX14 at 448 ¶ 19; PX17 at 522 ¶ 13; PX18 at 531 ¶ 7.

106 This action is not brought pursuant to the first proviso of Section 13(b), which addresses the circumstances under which the FTC can seek preliminary injunctive relief before or during the pendency of an administrative proceeding. Because the FTC brings this case under the second proviso of Section 13(b), its complaint is not subject to the procedural and notice requirements in the first proviso. FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984) (Congress did not limit the Court’s powers under the second and final proviso of § 13(b) and as a result this Court’s inherent equitable powers may be employed to issue a preliminary injunction during the pendency of an action for permanent injunctive relief); FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1111 (9th Cir. 1982) (holding that routine fraud cases may be brought under the second proviso, without being conditioned on the first proviso requirement that the FTC initiate an administrative proceeding).


20

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

the FTC may seek, and, after proper proof, the court may issue, a permanent

injunction”107 against violations of “any provision of law enforced by the Federal Trade

Commission.” 15 U.S.C. § 53(b). Section 13(b) confers the full breadth of the Court’s

inherent equitable authority not only to grant a permanent injunction but also to grant all

preliminary relief necessary to accomplish complete justice and effectuate ultimate relief.

FTC v. World Wide Factors, Ltd., 882 F.2d 344, 346-47 (9th Cir. 1989) (affirming

district court’s power to freeze assets); H.N. Singer, 668 F.2d at 1113 (affirming

preliminary injunction and personal and corporate asset freeze). The exercise of this

broad, equitable authority is particularly appropriate where, as here, the public interest is

at stake. United States v. Laerdal Mfg., 73 F.3d 852, 857 (9th Cir. 1995). Indeed, in

numerous cases brought by the FTC, courts in this Circuit have granted such preliminary

equitable relief.108

To obtain a preliminary injunction, the FTC must show a likelihood of success on

the merits and that the equities weigh in favor of granting the relief requested. FTC v.

Affordable Media, LLC, 179 F.3d 1228, 1233 (9th Cir. 1999); World Wide Factors, 882

F.2d at 346. Harm to the public is presumed when a statute has been violated. United

States v. W.T. Grant Co., 345 U.S. 629, 632 n.5 (1953); see also United States v. Odessa

107 A case involving ongoing deceptive or unfair and unlawful practices, such as this one, qualifies as a

“proper case” under Section 13(b). H.N. Singer, 668 F.2d at 1111, 1113; see also FTC v. Evans Prods. Co., 775 F.2d 1084, 1086-87 (9th Cir. 1985).

108 Courts in this Circuit have issued preliminary injunctions and temporary restraining orders with injunctive and other ancillary relief in circumstances similar to those found here. See, e.g., FTC v. Moneymaker, 2:11-cv-00461-R-LH-RJJ (D. Nev. Mar. 25, 2011); FTC v. Ivy Capital, Inc., 2:11-cv-00283-JCM-GWF (D. Nev. Mar. 25, 2011); FTC v. Immigration Ctr., 3:11-cv-00055-LRH-VPC (D. Nev. Jan. 26, 2011); FTC v. Grant Connect, LLC, 2:09-cv-01349-PMP-RJJ (D. Nev. Aug. 18, 2009); FTC v. Rincon Mgmt. Servs., LLC, 5:11-cv-01623-VAP-SP (C.D. Cal. Nov. 10, 2011); FTC v. Forensic Case Mgmt. Servs., Inc., Case No. LACV11-7484-RGK (C.D. Cal. Sep. 27, 2011); FTC v. Inc21.Com Corp., CV-10-0022-WHA (N.D. Cal. Feb. 19, 2010); FTC v. Nat’l Awards Serv. Advisory, cv-10-5418 (N.D. Cal. Dec. 15, 2010); FTC v. J.K. Publ’ns, Civ. No. 99-00044 (C.D. Cal. Mar. 16, 1999).


21

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Union Warehouse Co-op, 833 F.2d 172, 175 (9th Cir. 1987) (where injunction is

authorized by statute, enforcing agency need not show irreparable injury). In weighing

the equities in such an action, public equities should receive greater weight. World Wide

Factors, 882 F.2d at 347; see also Affordable Media, 179 F.3d at 1236.

B. The Evidence Demonstrates a Likelihood of Success in Proving Violations of the FTC Act, TILA, and EFTA

1. FTC Act Violations

Defendants falsely represent the duration and cost of their loans, and use

deceptive practices to collect or attempt to collect on them, all in violation of the FTC

Act.

An act or practice is “deceptive” under Section 5(a) of the FTC Act,

15 U.S.C. § 45(a), if it involves a material representation or omission that is likely to

mislead consumers, acting reasonably under the circumstances, to their detriment. FTC

v. Stefanchik, 559 F.3d 924, 928 (9th Cir. 2009); FTC v. Cyberspace.com, LLC, 453 F.3d

1196, 1199 (9th Cir. 2006); FTC v. Pantron I Corp., 33 F.3d 1088, 1095-96 (9th Cir.

1994). A representation, omission, or practice is material if it “involves information that

is important to consumers and, hence, likely to affect their choice of, or conduct

regarding, a product.” Cyberspace.com, 453 F.3d at 1201 (internal citations omitted).

Terms relating to the price of a product are material. See FTC v. Figgie Int’l, Inc., 994

F.2d 595, 608 (9th Cir. 1993). The Court may also presume express claims to be

material. Pantron I Corp., 33 F.3d at 1095-96.

Defendants may not lure consumers with deceptive statements and then provide

truthful information elsewhere in the solicitation or later in the transaction. See, e.g.,

Cyberspace.com, 453 F.3d at 1200-01; FTC v. Direct Mkt’g. Concepts, Inc., 624 F.3d 1,

12 (1st Cir. 2010) (“[D]isclaimers or qualifications . . . are not adequate to avoid liability

unless they are sufficiently prominent and unambiguous to change the apparent meaning


22

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

of the claims and to leave an accurate impression” rather than “creating contradictory

double meanings.”) (citing Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir.

1989)); Am. Home Products, 98 F.T.C. 136, 370 (1981), aff’d, 695 F.2d 681, 688 (3d Cir.

1982) (“[W]hen the first contact between a seller and buyer occurs through a deceptive

advertisement, the law is violated even if the truth is subsequently made known to the

purchaser.”). In determining what messages may reasonably be ascribed by a consumer

to a statement or set of statements, the “net impression” of all representations made is

considered. See, e.g., Cyberspace.com, 453 F.3d at 1200; FTC v. Brown & Williamson

Tobacco Corp., 778 F.2d 35, 41-43 (D.C. Cir. 1985) (overall description of cigarette tar

content in advertisement was deceptive even though fine print accurately explained how

cigarette tar content was measured, because consumers were unlikely to read the fine

print).

Here, Defendants deceptively represent that they will withdraw a specified

amount on a single date, and that the funds withdrawn from the consumer’s bank account

will equal the amount financed plus a one-time, stated finance charge. Likewise, in their

collection practices, Defendants deceptively represent that consumers may be arrested,

prosecuted, or imprisoned for failing to pay Defendants, and that Defendants will file

lawsuits against consumers who fail to pay them.

a) Lending Violations

(1) Defendants Falsely Represent that They Will Withdraw the Repayment Amount on a Single Date

Defendants represent to consumers that they will automatically withdraw from

consumers’ bank accounts the full amount owed on a single scheduled payment date.

(See Part IV.A, pp. 13-18, supra.) On their website, Defendants state, “When your loan

is due, we automatically deduct your scheduled payment from your bank account along


23

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

with any applicable fees.” Nowhere do Defendants state that the “scheduled payment” is

anything less than the full amount owed. In fact, Defendants’ Loan Disclosure includes a

TILA box conspicuously stating that “[t]he amount you will have paid after you have

made the scheduled payment” is the “Total of Payments” ($390.00 in the above

example).

Defendants do not withdraw the repayment amount on a single date as stated; they

instead withdraw loan payments over a series of consumer paydays and assess an

additional finance charge at each payday. (See Part IV.A, pp. 16-18, supra.) The result

is that Defendants withdraw significantly more from consumers’ bank accounts than they

represent. Defendants’ misrepresentation as to the cost of their loans is material, Figgie

Int’l, Inc., 994 F.2d at 608, and if consumers knew that the loans would be drawn out

longer than Defendants represent (with a higher cost resulting), they might choose not to

take out a loan with Defendants. Cyberspace.com, 453 F.3d at 1201.

(2) Defendants Falsely Represent that the Total of Payments Will Equal the Amount Financed Plus a One-Time, Stated Finance Charge

Defendants represent to consumers that the cost of repaying the payday loans they

issue will be the amount financed plus a stated, fixed finance charge. (See Part IV.A, pp.

14-18, supra.) For example, when a consumer takes out a loan for $300, Defendants

represent that the finance charge will be $90 and the total of payments will be $390. In

fact, Defendants’ default payment schedule results in a $300 loan costing a consumer

$675 in finance charges, with payments totaling $975.

Defendants vaguely describe the multi-step repayment process in confusing text

buried in the Loan Disclosure and at the end of a subsequent email, both of which

contradict the prominent “FINANCE CHARGE” and “Total of Payments” amounts

stated to consumers in the conspicuous TILA box. (See Part IV.A, pp. 16-17, supra.)

Even assuming those statements did articulate the multiple payment timeline and


24

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

associated cost in a comprehensible manner, they are not sufficient to undo the “net

impression” of Defendants’ more prominent disclosures as to payment schedule and loan

cost, namely that Defendants will automatically effectuate repayment of the loan via a

single payment in the amount of the stated “Total of Payments” ($390 in the above

example.) See Cyberspace.com, 453 F.3d at 1200; Brown & Williamson, 778 F.2d at 42-

43. As with Defendants’ misrepresentation regarding the duration of the loans, the dollar

differential between Defendants’ fee disclosures and the amount of fees they actually

charge to consumers ($585 in the above example) is clearly material and would influence

reasonable consumers’ choices and conduct regarding Defendants’ loans.

b) Debt Collection Violations

(1) Defendants Falsely Represent that Consumers May Be Arrested, Prosecuted, or Imprisoned for Failing To Pay

When attempting to collect the sums that consumers allegedly owe, on numerous

occasions Defendants represent to consumers that consumers who do not pay will be

arrested, prosecuted, or imprisoned. (See Part IV.C, p. 19, supra.) After reviewing

thousands of consumer complaints filed against Defendants with Better Business

Bureaus, the Commission, and numerous law enforcement agencies, the FTC has not

found any complaints indicating that Defendants tried to have any borrowers arrested,

prosecuted, or imprisoned. See FTC v. Check Investors, Inc., 502 F.3d 159, 163-64 (3d

Cir. 2007) (Defendant’s “threats of prosecution were all false. It never notified law

enforcement authorities…”). In any event, Defendants could not have taken such action

because, absent contempt of court or other very unusual circumstances, the failure to pay

legally cannot result in arrest, prosecution, or imprisonment. See Goldyn v. Hayes, 444

F.3d 1062, 1069 (9th Cir. 2006) (“Failure to repay a loan, however, is not a crime; the


25

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

days of imprisoning insolvent debtors are long gone.”) (citing United States and Nevada

constitutions).109

Because Defendants do not and cannot cause consumers to be arrested,

prosecuted, or imprisoned for failing to pay their loans, their representations to

consumers are deceptive and violate Section 5(a) of the FTC Act. In previous contested

FTC matters, courts have found such verbal threats to violate the FTC Act and enjoined

them. See Prelim. Inj. at 1, 5, FTC v. Rincon Mgmt. Servs., LLC, Case No. ED-cv-11-

1623-VAP (C.D. Cal. Oct. 11, 2011); Prelim. Inj. at 2, 7, 9, FTC v. Forensic Case Mgmt.

Servs., Inc., Case No. LACV11-7484-RGK (C.D. Cal. Sep. 12, 2011); Prelim. Inj. at 2, 6-

7, FTC v. Rawlins & Rivera, No. 07-CV-146 (M.D. Fla. Apr. 6, 2007); cf. 15 U.S.C. §

1692e(4) (unlawful for third-party debt collectors to threaten arrest or imprisonment

unless such action is lawful and the debt collector or creditor intends to take such

action).110

(2) Defendants Falsely Represent that they Will File Lawsuits Against Nonpaying Consumers

When attempting to collect the sums that consumers allegedly owe, Defendants

also represent to consumers in numerous instances that they will file suits against

consumers who do not pay their alleged debts. (See Part IV.C, p. 19, supra.) After

searching federal and state court dockets in addition to reviewing the volumes of

consumer complaints against Defendants (the same as those discussed in the subsection

109 See also 16A C.J.S. Const. § 710 (2011) (“As a general rule, a person cannot be imprisoned for debt.”);

5 Am. Jur. 2d Arrest § 54 (2007) (“Most state constitutions contain provisions which . . . generally prohibit imprisonment for debt.”).

110 The Fair Debt Collections Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., may not apply here because, based on information currently known to the FTC, Defendants are not “debt collectors” within the meaning of the statute. Nevertheless, the above-cited provision is instructive to show Congressional intent to forbid the false and misleading practice of threatening consumers with criminal consequences for failure to pay private debts.


26

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

above), the FTC has not found any indication that Defendants have initiated any civil

litigation to recover on their borrowers’ purported debts.111 See Check Investors, Inc.,

502 F.3d at 163 (Defendant’s “threats of prosecution were all false … it [did not] take

steps to initiate civil suit against any consumer”).

Because Defendants do not initiate lawsuits against consumers for failing to pay

their loans, their representations to consumers are deceptive and violate Section 5(a) of

the FTC Act. As with Defendants’ threats regarding criminal sanctions, courts have

found such threats of civil litigation to violate the FTC Act and enjoined them. See

Rincon Mgmt., supra; Forensic Case Mgmt. Servs., supra; Rawlins & Rivera, supra; cf.

15 U.S.C. § 1692e(5) (unlawful for third-party debt collectors to threaten action unless

such action is lawful and the debt collector or creditor intends to take such action).112

2. TILA Violations

Defendants violate TILA and its implementing Regulation Z by providing

inaccurate information when extending credit to consumers.

Under TILA and Regulation Z, creditors of closed-end credit must accurately

disclose, before the credit is extended, the following terms of the loan: the finance

charge; the annual percentage rate; the payment schedule; and the total of payments.113

111 Pacer and Lexis CourtLink searches show no such actions filed by Defendants against consumers. See

PX21 at 586 ¶ 5. In any event, in many states Defendants could not successfully sue consumers because Defendants are unlicensed lenders or because their loans violate the states’ usury laws. See supra note 88 and accompanying text; see 53 C.J.S. Licenses § 115 (2011) (“Generally, a contract entered into by a person . . . without taking out a license as required by law is void, illegal and unenforceable.”); 9 Richard A. Lord, A Treatise on the Law of Contracts § 20:38 (1998) (“Several states give the borrower in a usurious transaction varying degrees of relief. Some require him to pay the amount of the loan plus legal interest . . . [o]thers require him to pay only the amount actually loaned with no interest. A few do not require that the borrower repay anything . . . .”).

112 Although the FDCPA may not apply to this matter, see supra note 110, the above-cited provision is instructive to show Congressional intent to forbid the false and misleading practice of threatening consumers with lawsuits when in fact the debt collector or creditor has no intent to sue.

113 See TILA sections 121(a) and 128(b)(1), 15 U.S.C. §§ 1631(a) and 1638(b)(1); Regulation Z sections 1026.17(a), 1026.17(b), and 1026.18, 12 C.F.R. §§ 1026.17(a), 1026.17(b), and 1026.18. Every


27

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Defendants are “creditors” under TILA and Regulation Z because Defendants extend

consumer credit payable to Defendants and subject to a finance charge. 12 C.F.R. §

1026.2(a)(17).114 Defendants extend “closed-end credit” under the TILA regulations

because Defendants do not make additional credit available to consumers as they repay

their outstanding balances. 12 C.F.R. §§ 1026.2(a)(10) and (a)(20).115

In connection with their payday lending, Defendants violate TILA on numerous

occasions by inaccurately disclosing: (a) the finance charge; (b) the annual percentage

rate; (c) the payment schedule; and (d) the total of payments. (See supra Part IV.A, pp.

14-18.) Those terms are inaccurate in Defendants’ loan disclosures because they are

presented as if Defendants will withdraw the repayment amount on a single date and the

the consumer’s total payment will equal the amount borrowed plus a one-time finance

charge. In fact, the loan is repaid over multiple installments and Defendants thereby

assess multiple finance charges. This practice results in Defendants assessing an actual

finance charge, payment schedule, and total of payments that differ from those stated in

violation of TILA or Regulation Z constitutes a violation of the FTC Act. TILA section 108(c), 15 U.S.C. § 1607(c).

114 Regulation Z and Regulation E were recently renumbered in the CFR pursuant to the Consumer Financial Protection Bureau’s assumption of responsibility for enforcement of TILA and EFTA. See Truth in Lending, 76 Fed. Reg. 79768 (Dec. 22, 2011); Electronic Fund Transfers, 76 Fed. Reg. 81020 (Dec. 27, 2011). The current citations are used here although Defendants’ violations for the most part predate the renumbering.

115 TILA distinguishes between open-end and closed-end transactions. 12 C.F.R. §§ 1026.2(a)(10), (a)(20). A loan is considered open-end only if three conditions are met: the creditor reasonably contemplates repeated transactions; the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and the amount of credit that may be extended to the consumer during the term of the plan is generally made available to the consumer as the consumer repays the outstanding balance. Otherwise, the loan is closed-end. Here, Defendants’ loans are closed-end because, regardless of the first two conditions, the third requirement for an open-end loan is not met. Specifically, Defendants’ Loan Disclosure sets forth a fixed loan amount – $300 in the above example – and does not provide for an increase in the credit extended as the consumer repays the loan.


28

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Defendants’ TILA disclosures.116 In numerous cases, the Defendants likewise misstate

the APR.117 Significantly, Defendants never disclose to the consumer the actual finance

charge, payment schedule, total of payments, and APR that apply if the loan is

administered as it is deceptively designed, i.e., over the multiple repayment period. 118 As

a result, Defendants violate TILA.

3. EFTA Violations

Defendants violate EFTA and its implementing Regulation E by requiring

consumers to agree to preauthorized fund transfers from their bank accounts.

Under EFTA regulations, “[n]o ... person may condition an extension of credit to

a consumer on the consumer’s repayment by preauthorized electronic fund transfers.” 12

C.F.R § 1005.10(e).119 Defendants, who include natural persons and corporations, are

“persons” within the meaning of EFTA regulations. Id. § 1005.2(j) (defining “person” as

a natural person or an organization, including a corporation).

116 In the example discussed in Part IV.A, the finance charge is $675, the payment schedule occurs over

ten pay periods, and the total of payments is $975, but Defendants present the finance charge as $90, to be paid on a single date, resulting in a total of payments of $390.

117 In the example discussed in Part IV.A, the true APR is 727.3669, but Defendants state it is 684.38. This discrepancy is sufficiently large to be considered an inaccurate report under TILA (i.e., beyond 1/8 of a percentage point). See 15 U.S.C. § 1606(c); 12 C.F.R. § 1026.22(a)(2). In numerous other cases, Defendants likewise understate the APR for their payday loans.

118 Although Defendants purport to give consumers the option of repaying their loans sooner by making special arrangements, the “legal obligation” created by the consumer in the contract is to repay the loan in multiple payments. See 12 C.F.R. § 226.17(c) (disclosures must reflect “the terms of the legal obligation between the parties”). The TILA disclosures must correspond to the finance charge, payment schedule, and total of payments associated with the terms of the loan, not the terms that would result if the consumer opts to repay earlier than required. Id.

119 See also 15 U.S.C. § 1693k(1); and 12 C.F.R. § 1005.10(e)(1), Supp. 1, 76 Fed. Reg. at 81046. As with the TILA provisions cited above, every violation of EFTA or Regulation E constitutes a violation of the FTC Act. 15 U.S.C. § 1693o(c).


29

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Under EFTA regulations, “credit” is defined as the right “to incur debt and defer

its payment.” Id. § 1005.2(f). Here, Defendants extend “credit” to consumers by

offering payday loans that permit consumers to “defer” payment of the balance.

Further, the regulations define a “preauthorized electronic fund transfer” as “an

electronic fund transfer authorized in advance to recur at substantially regular intervals.”

Id. § 1005.2(k). Defendants’ offer of credit is conditioned on “preauthorized electronic

fund transfers” because their financing contracts require consumers to agree to periodic

(usually biweekly) electronic debit entries from consumers’ bank accounts. (See Part

IV.B, pp. 18-19, supra.) Thus, Defendants’ financing contracts extend credit conditioned

on preauthorized electronic fund transfers in plain violation of EFTA.

C. The Balance of Equities Favors Granting Injunctive Relief

In addition to showing a likelihood of success on the merits, the FTC can readily

show that the equities weigh in favor of granting its request for a preliminary injunction.

In weighing the equities, the public interest should receive greater weight than private

interests. Affordable Media, 179 F.3d at 1236; World Wide Factors, 882 F.2d at 347.

Here, the public interest in protecting consumers from Defendants’ deceptive and

otherwise unlawful payday lending and collection activities is exceedingly strong, and far

outweighs any private interest Defendants may have in continuing to engage in unlawful

practices. There is no valid public interest in permitting Defendants to make loans to

consumers that lack truthful and accurate disclosures of material loan terms and costs, to

engage in deceptive debt collection practices, and to violate EFTA by conditioning loans

upon permitting Defendants to make automatic withdrawals from consumers’ bank

accounts. Compliance with the law is hardly an unreasonable burden. See World Wide

Factors, 882 F.2d at 347; FTC v. City West Advantage, Inc., No. 08-609, 2008 WL

2844696 at *6 (D. Nev. July 22, 2008). Indeed, Defendants “can have no vested interest


30

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

in a business activity found to be illegal.” See United States v. Diapulse Corp. of Am.,

457 F.2d 25, 29 (2d Cir. 1972) (internal quotations and citations omitted).

D. Defendants Are Liable for Monetary and Injunctive Relief

All of the Corporate Defendants, as members of a common enterprise, are jointly

and severally liable for injunctive and equitable monetary relief for their unlawful acts.

Likewise, the six Individual Defendants are each liable for injunctive and monetary relief

for their knowledge of and ability to control or participate in the entities’ acts and

practices. The Relief Defendants obtained money and property acquired through

Defendants’ unlawful acts and practices to which they have no legitimate claim. Finally,

none of the Defendants can avoid application of federal law by claiming tribal affiliation.

1. Corporate Defendants

Where corporate entities operate together and act as a common enterprise, each

may be held liable for the deceptive acts and practices of the others. FTC v. Network

Servs. Depot, Inc., 617 F.3d 1127, 1143 (9th Cir. 2010); FTC v. Think Achievement

Corp., 144 F. Supp. 2d 993, 1011 (N.D. Ind. 2000), aff’d 312 F.3d 259 (7th Cir. 2002);

see also FTC v. John Beck Amazing Profits, LLC, 2009 U.S. Dist. LEXIS 130923, at *40

(C.D. Cal. Nov. 17, 2009) (citing same; other citations omitted); FTC v. J.K. Publ’ns,

Inc., 99 F. Supp. 2d 1176, 1202 (C.D. Cal. 2000).

“[E]ntities constitute a common enterprise when they exhibit either vertical or

horizontal commonality—qualities that may be demonstrated by a showing of strongly

interdependent economic interests or the pooling of assets and revenues.” Network Servs.

Depot, Inc., 617 F.3d at 1142-43. Courts consider the following factors when

determining whether a common enterprise exists: “common control; the sharing of office

space and officers; whether business is transacted through a maze of interrelated

companies; the commingling of corporate funds and failure to maintain separation of

companies; unified advertising; and evidence that reveals that no real distinction exists


31

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

between the corporate defendants.” FTC v. Grant Connect, LLC, 2011 U.S. Dist. LEXIS

123702, *36-37 (D. Nev. Oct. 25, 2011) (citations omitted).

Here, the Corporate Defendants exhibit the hallmark characteristics of a common

enterprise. (See Part III.B, pp. 3-13, supra.) The entities are commonly controlled by the

Individual Defendants, most notably Scott Tucker and Blaine Tucker, who write

thousands of checks for and control the bank accounts of each, and by Timothy Muir,

who acts as registered agent and pays for multiple domain name registrations and other

entity fees. (See pp. 9-11, supra.) Subsets of the companies share identical places of

business and management addresses at locations in Kansas, Oklahoma, and Nevada. (See

pp. 3-9, supra.) Reflective of a “maze of interrelated companies,” the entities share

phone numbers, routinely make payments to one another, commingle funds, and share

common lending and collection employees on AMG’s payroll. (Id.) Because their

lending and collection websites are virtually identical, and because they share AMG’s

centralized workforce, the payday lenders use common advertising language, loan

applications, consumer communications, privacy policies, and contract language. (See

pp. 13-15, supra.) Through their control of the Lending Defendants’ bank accounts,

Scott Tucker and Blaine Tucker cause Red Cedar Services, SFS, Inc., and TFS to pay

nearly all of their payday lending revenues to AMG, Black Creek Capital, Level 5, and

associated entities under their control; the recipients of those funds then further distribute

those funds in a complex and intertwined manner to, inter alia, pay for compensation and

personal expenditures of the common control persons. (See pp. 8-13, supra; see also

PX22 at 1565 (graphic showing common regular payments from Red Cedar Services,

SFS, Inc., and TFS to associated entities.)

2. Individual Defendants

Individuals may be held liable for injunctive relief based on corporate entities’

violations if (1) the corporation committed misrepresentations of a kind usually relied on


32

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

by a reasonably prudent person and resulting in consumer injury and (2) individuals

participated directly in the violations or had authority to control the entities and had some

knowledge of the deceptive acts or practices. Affordable Media, 179 F.3d at 1234; see

also FTC v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1170-71 (9th Cir. 1997). The

first element of this test as to the corporations’ conduct has been met as discussed in Parts

V.B.1.a and V.B.1.b, supra.

Requisite knowledge for individuals is defined as actual knowledge of material

misrepresentations, reckless indifference to the truth or falsity of a representation, or an

awareness of a high probability of fraud along with an intentional avoidance of the truth.

Affordable Media, 179 F.3d at 1234 n.4; see also Publ’g Clearing House, 104 F.3d at

1171 (citations omitted). The FTC need not show that the individual defendant intended

to defraud consumers. Affordable Media, 179 F.3d at 1234. Where a common enterprise

is present, an individual defendant’s liability for monetary relief is joint and several with

all entities participating in the enterprise. See FTC v. Nat'l Urological Group, Inc., 645

F.Supp. 2d 1167, 1213-14 (N.D. Ga. 2008). Here, the conduct of each of the Individual

Defendants satisfies the standard for individual liability, particularly the likelihood of

success standard warranting a preliminary injunction. Affordable Media, 179 F.3d at

1236.

As a preliminary matter, each of the Individual Defendants has a position of

authority with one or more entities and the authority sign documents on their behalf (see

Part III.B.3, pp. 8-13, supra); this demonstrates “requisite control.” Publ’g Clearing

House, 104 F.3d at 1170. As discussed below, additional facts regarding the Individual

Defendants further demonstrate control and knowledge.

Scott Tucker and Blaine Tucker have served as officers for numerous Corporate

Defendants in the common enterprise, including AMG (and its predecessor, CLK

Management), Black Creek Capital, Inc., Broadmoor Capital Partners, LLC, LeadFlash


33

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Consulting, LLC, Level 5 Motorsports, LLC, and TFS Corp. (See Part III.B.3, pp. 9-11,

supra.) They are visible figures personally monitoring and directing the lending and

collections operations from AMG’s centralized office. (Id.) In addition, their prolific

check writing and systematic siphoning of funds from the Lending Defendants – the FTC

has identified approximately 10,000 checks signed by Scott Tucker and Blain Tucker for

dozens of different bank accounts registered to the Corporate Defendants and related

persons – further demonstrates their extraordinary control over the entities engaged in the

unlawful conduct at issue here. (Id.)

Similarly, Timothy Muir controls the finances of the each of the payday lenders

and serves as their resident agent. (See Part III.B.3, p. 11, supra.) Muir is a substantial

beneficiary of funds from the common enterprise, and oversees Black Creek Capital – a

pivotal hub for the Corporate Defendants’ financial dealings involved in the transfers of

approximately $44 million. And through his firm, The Muir Law Firm, LLC, Muir also

pays for the domain registrations and other fees of the five websites at issue.

Don Brady is the CEO of AMG, the director of TFS Corp., a signatory on TFS

Corp.’s bank account, and the administrator of the websites used by UnitedCashLoans,

USFastCash, and Ameriloan. (See Part III.B.3, pp. 11-12, supra.) Robert Campbell is

the director of SFS, Inc., a signatory on its OneClickCash bank account, and the

administrator of the website used by OneClickCash. (See Part III.B.3, p. 12, supra.)

Troy LittleAxe is the director of Red Cedar Services, a signatory on its bank account, and

the administrator for the website used by 500FastCash. (See Part III.B.3, pp. 12-13,

supra.) Each of these individuals has the authority and ability to control the actions and

finances of the principal lending members of the common enterprise. (See Part III.B.3,

pp. 11-13, supra.) They each admit to having knowledge of the relevant entities’ day-to-

day operations. (Id.) And, as website administrators, they are responsible for the


34

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

misrepresentations contained in Defendants’ websites and loan disclosures generated

therefrom. (Id.)

In addition to the foregoing, the Corporate Defendants under the Individual

Defendants’ control have been the subject of a number of private lawsuits, along with

numerous complaints and inquiries from consumers, Better Business Bureaus (“BBBs”),

and state consumer protection agencies, generally addressing conduct similar to that

alleged in the complaint.120 The Individual Defendants have been involved in responding

to such matters including by responding to media and participating in the defense of

litigation brought by state law enforcement.121 As a result, the Individual Defendants

would necessarily have been aware of the entities’ lending and collection practices at

issue here. See FTC v. MacGregor, No. 08–55838, 2009 WL 5184070 at *3 (9th Cir.

Dec. 30, 2009) (individual defendant possessed requisite knowledge for purposes of

injunctive and monetary relief in light of numerous customer complaints and

investigations by Better Business Bureau and state attorneys general); see also Think

Achievement, 144 F. Supp.2d at 1011 (individual “defendants who know of government

inquiries or investigations into their own or their associates’ behavior may be charged

with knowledge for purposes of imposing monetary liability under the FTC Act.”) (citing

FTC v. NCH, Inc., No. Civ. A. No. CV–94–138–LDG, 1995 WL 623190 at *3 (D. Nev.

Sept. 5, 1995)).

3. Relief Defendants

The Relief Defendants, Park 269 LLC and Kim Tucker, should not be permitted

to keep the numerous and extremely valuable unearned transfers they received from the

unlawful corporate enterprise.

120 PX22 at 620-27 ¶¶ 86-92.

121 PX22 at 598 ¶ 33; 620-27 ¶¶ 86-92; 927-1068, 1846, 1855.


35

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The FTC may obtain disgorgement from relief defendants, or nominal defendants,

who have received ill-gotten gains and do not have a legitimate claim to those assets;

knowledge of or participation in the wrongdoing is not required for recovery from such

persons. See FTC v. Ivy Capital, Inc. No. 2:11-CV-283 JCM GWF, 2011 WL 2118626,

at *4 (D. Nev. May 25, 2011).

Here, the Relief Defendants were unjustly enriched by, among other things,

significant funds from AMG derived from the unlawful practices discussed above and

applied to the purchase and maintenance of, taxes for, and improvements to an Aspen,

Colorado mansion owned by the Relief Defendants. (See Part III.B.4, pp. 13-14, supra.)

Scott Tucker, Kim Tucker’s husband, authorized checks from AMG for those purposes.

(See p. 13, supra.) Kim Tucker also receives significant distributions from Defendant

Black Creek Capital and Broadmoor Capital Partners, LLC, all derived from Defendants’

wrongdoing. (See id.) These considerable benefits to Park 269 LLC and Kim Tucker

originated from the unlawful activities of the common enterprise; the Relief Defendants

do not have a legitimate claim to them. For those reasons, the Relief Defendants should

be ordered to complete financial disclosures on an expedited basis. (Proposed Order §

VI.)

4. Defendants Cannot Avoid Application of Federal Law Based on Tribal Affiliation

Although Defendants have contended in various state proceedings that the

Lending Defendants are owned by Indian tribes and are therefore immune from state

government prosecution, Indian-owned commercial enterprises enjoy no sovereign

immunity vis-à-vis the federal government122 and are required to comply with generally

122 See, e.g., United States v. Red Lake Band Of Chippewa Indians, 827 F.2d 380, 382 (8th Cir. 1987)

(“[I]t is an inherent implication of the superior power exercised by the United States over the Indian tribes that a tribe may not interpose its sovereign immunity against the United States.”); United States


36

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

applicable federal laws. In Fed. Power Comm’n. v. Tuscarora Indian Nation, the

Supreme Court noted that it is “well settled . . . that a general statute in terms applying to

all persons includes Indians and their property interests.” 362 U.S. 99, 116 (1960); see

also NLRB v. Chapa De Indian Health Program, Inc., 316 F.3d 995, 998-99 (9th Cir.

2003) (following Tuscarora); Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113,

1115 (9th Cir. 1985). The FTC Act, TILA, and EFTA are all federal statues of general

applicability; none contains any provision that treats tribal commerce any differently than

nontribal commerce.

Indeed, Defendants admit that their activities are governed by federal law. Two

of the tribes conceded—in a hearing during which the FTC’s pre-complaint investigation

of the Defendants was specifically discussed—that they are subject to federal law:

“Tribes are subject to all Federal laws, of course, and so that would not immunize the

tribes from any sort of federal action.”123 Moreover, Defendants affirmatively invoke

federal law in their loan documents and websites.124 In short, Defendants can advance no

argument in this federal proceeding that they are immune to suit or exempt from the FTC

Act, TILA, or EFTA.

v. Yakima Tribal Court, 806 F.2d 853, 861 (9th Cir. 1986) (“[T]he United States may sue Indian tribes and override tribal sovereign immunity.”).

123 See Colorado v. Cash Advance, No. 2005-CV-001143 (Colorado Dist. Ct.), Nov. 21, 2011 Tr. at 100; see also PX22 at 939-40 ¶ 9 (stating that “all federal laws” apply to Ameriloan, US Fast Cash, and United Cash Loans); PX22 at 1858 (tribal chief stating that AMG’s online tribal lending is subject to federal law).

124 Defendants’ Loan Disclosure states, “this note and your account shall be governed by all applicable federal laws and the laws of the jurisdiction in which the Lender is located . . . .” and also contains an arbitration clause that claims to be “governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16.” PX10 at 344. Defendants’ websites cite, among other statutes, the Gramm-Leach-Bliley Act (PX22 at 1195; PX22 at 1227), Telemarketing Sales Rule (PX02 at 57; PX02 at 86), the CAN-SPAM Act of 2003 (PX02 at 56; PX02 at 85), the Electronic Signatures in Global and National Commerce Act (PX22 at 1208; PX22 at 1241), and “the copyright laws of the United States” (PX22 at 1234).


37

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

E. A Preliminary Injunction Is Necessary to Preserve Effective Final Relief

In light of Defendants’ ongoing deceptive and unlawful conduct in extending and

collecting payday loans, this Court’s issuance of a preliminary injunction is necessary to

preserve effective final relief. The FTC’s proposed preliminary injunction would

preserve the status quo until the Court can adjudicate whether Defendants’ acts and

practices violate the FTC Act, TILA, and EFTA as described above. The proposed order

principally bars Defendants’ wrongful conduct, requires Defendants to provide an

accounting on an expedited basis, and requires Defendants to preserve potentially

relevant materials. Each of the provisions in the FTC’s proposed order is within the

authority of the Court and is routine in similar matters. (See supra note 108.)

The proposed preliminary injunction is tailored to Defendants’ unlawful practices

as alleged in the Complaint and would require Defendants immediately to cease them.

Specifically, Defendants in their lending and collections would be barred from:

(I) misrepresenting to consumers that they will withdraw the full amount owed by the consumer on a single date, that the total of payments will be the borrowed amount plus a single finance charge, or whether and to what extent a payment will be applied to principal and/or fees;

(II) misrepresenting to consumers that they can suffer criminal consequences, or that Defendants will sue them, if they fail to repay Defendants;

(III) failing to accurately disclose to consumers before extending credit the finance charge, annual percentage rate, payment schedule, and total of payments;

(IV) extending credit conditioned on preauthorized electronic fund transfers.

(Proposed Order §§ I-IV.) This requested preliminary injunctive relief is appropriate

because, without it, the unlawful acts will continue or recur. See FTC v. Freecom

Commc’ns, Inc., 401 F.3d 1192, 1204 (10th Cir. 2005).


38

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

In addition to injunctive relief, the FTC will seek a final order with equitable

monetary relief. This is within the Court’s broad authority to fashion appropriate

remedies for violations of the FTC Act. See FTC v. Sec. Rare Coin & Bullion Corp., 931

F.2d 1312, 1314-16 (8th Cir. 1991). To determine the scope of the harm and identify

assets to effectuate final relief, the FTC requests that the Court issue an order requiring an

immediate accounting of Defendants’ and Relief Defendants’ profits and losses and

assets and liabilities. The FTC therefore requests that the Court order Defendants to

complete and return to the FTC the financial disclosure forms attached to the proposed

protective order. (Proposed Order § VI.) An accounting and financial statements will

increase the likelihood of identifying assets pending final determination of this matter so

that appropriate monetary relief can be ordered. See, e.g., SEC v. Bankers Alliance

Corp., 881 F. Supp. 673, 676 (D.D.C. 1995) (court ordered defendants to file with the

Court and serve upon the commission a sworn financial accounting); SEC v. Parkersburg

Wireless LLC, 156 F.R.D. 529, 532 n.3, 537 (D.D.C. 1994).

The disclosure of certain information and expedited discovery falls well within

the court’s broad and flexible authority in equity to grant preliminary relief in cases

involving the public interest. See Porter v. Warner Holding Co., 328 U.S. 395, 398

(1946); FSLIC v. Dixon, 835 F.2d 554, 562 (5th Cir. 1987); Fed. Express Corp. v. Fed.

Expresso, Inc., No. 97-CV-1219, 1997 U.S. Dist. LEXIS 19144, at *6 (N.D.N.Y. Nov.

24, 1997) (early discovery “will be appropriate in some cases, such as those involving

requests for a preliminary injunction”) (quoting commentary to FED. R. CIV. P. 26(d));

FTC v. Vocational Guides, Inc., No. 01-0170, 2008 WL 4908769, at *6 (M.D. Tenn.

Nov. 12, 2008) (finding that financial disclosure and expedited discovery are in the

public interest); FED. R. CIV. P. 1, 26(d), 30(a), 33(a), and 34(b) (district courts may

depart from normal discovery provisions, including applicable time frames, to meet the

discovery needs of particular cases); see also supra note 108.


39

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The proposed order also contains a provision directing Defendants to preserve

records and evidence. (Proposed Order § VII.) It is appropriate to enjoin Defendants

charged with deception from destroying evidence and doing so would place no significant

burden on them. See SEC v. Unifund SAL, 910 F.2d 1028, 1040 n.11 (2d Cir. 1990).

Further, the hardship caused by the relief would be temporary and greatly outweighed by

the public’s interest in safeguarding documents and information necessary to recover

assets procured through deception.

VI. CONCLUSION

For all the foregoing reasons, the FTC respectfully requests that this Court grant

its motion for preliminary injunction and other equitable relief.

Dated: April 2, 2012

Respectfully submitted, /s/ Nikhil Singhvi Nikhil Singhvi Julie G. Bush Jason D. Schall Attorneys for Plaintiff Federal Trade Commission


1

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

CERTIFICATE OF SERVICE

I, Nikhil Singhvi, certify that plaintiff will cause the following persons to be served with the foregoing memorandum of points and authorities, along with the accompanying exhibits, via hand delivery at the following addresses: Dated: April 2, 2012

/s/ Nikhil Singhvi NIKHIL SINGHVI

AMG Capital Management, LLC c/o Agent Services, Ltd. 871 Coronado Center Drive, Suite 200 Henderson, Nevada 89052 AMG Services, Inc. 10895 Lowell Avenue Overland Park, Kansas 66210 Black Creek Capital Corporation c/o Nevada LLC Services, LLC 289 Manzanita Ranch Lane Henderson, Nevada 89012 Blaine A. Tucker 14568 Sherwood Rd Overland Park, KS 66224-9803 Broadmoor Capital Partners, LLC c/o Agent Services, Ltd. 871 Coronado Center Drive, Suite 200 Henderson, Nevada 89052 Kim C. Tucker 2405 West 114th St. Leawood, KS 66211-3021 Kim C. Tucker 269 Park Ave. Aspen, CO 81611

LeadFlash Consulting, LLC c/o Agent Services, Ltd. 871 Coronado Center Drive, Suite 200 Henderson, Nevada 89052 Level 5 MotorSports, LLC c/o Agent Services, Ltd. 871 Coronado Center Drive, Suite 200 Henderson, Nevada 89052 The Muir Law Firm, LLC 10895 Lowell Avenue Overland Park, Kansas 66210 Park 269 LLC 5600 West 97th Street Overland Park, Kansas 66207 Partner Weekly, LLC c/o John D. Hancock Law Group, PLLC 871 Coronado Center Drive, Suite 200 Henderson, Nevada 89052 Scott A. Tucker 2405 West 114th St. Leawood, KS 66211-3021 Scott A. Tucker 269 Park Ave. Aspen, CO 81611


2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Timothy Muir 5600 West 97th Street Overland Park, KS 66207 Don E. Brady 57200 East Highway #125 Afton, OK 74331 Tribal Financial Services 3531 P Street, NW Miami, OK 74355 Troy L. LittleAxe 406 Lindenwood Drive Bartlesville, OK 74003

Red Cedar Services, Inc. c/o Troy LittleAxe, Jr. 418 G Street Southeast Miami, OK 74354 Robert D. Campbell 202 West Leaf Shooters Drive Niobrara, NE 68760 SFS, Inc. 52946 Highway 12, Suite 3 Niobrara, NE 68760


attorneys for plaintiff federal trade commission 835 f.2d 554 (5th cir. 1987) ..... 38 ftc v....

Documents